Ally's Profit Jumps as Auto Originations, Deposits Climb -- 2nd Update

By Lisa Beilfuss and Rachel Louise Ensign 

Ally Financial Inc. said profit in its fourth quarter soared thanks in part to rising auto-loan originations and retail deposits.

The Detroit lender's CEO, Jeffrey Brown, also tried to address shareholder concerns in the wake of news that an investor is pressing for changes at the company. Shares rose slightly in afternoon trading, making Ally one of the few financial stocks not to decline during a broader selloff in stocks.

One of the nation's biggest auto lenders, Ally lost a big chunk of that business last year when General Motors Co. largely squeezed it out of its lucrative subsidized-leasing business. Ally has since worked to recoup much of that lost business.

In the fourth quarter, consumer auto originations edged up to $9.3 billion from $9 billion a year earlier. Excluding GM, originations jumped 35% from the year-ago period. Meanwhile, retail deposits grew 16% from a year earlier to $55.4 billion as the lender, formerly known as GMAC and spun off from GM in 2006, added more customers and benefited from increased demand for savings products.

For the year, Ally exceeded its own targets for both retail deposit growth and auto originations, according to Mr. Brown.

Ally stock is down more than 16% over the last year, compared with a more than 10% drop in the KBW Nasdaq bank index.

That performance of the shares has led one of the bank's investors, hedge fund Lion Point Capital, to nominate two directors to Ally's board and propose a committee to study strategic alternatives for the company. Ally chairman Franklin Hobbs said in January that Lion Point had a "clear agenda" to force a sale of the firm that wasn't in the best interest of investors. Lion Point said at the time that it wants to work "constructively" with the lender, which it believes is undervalued.

On Tuesday, Mr. Brown said he was disappointed with the stock's performance and would explore "all options" to improve value for shareholders.

But Mr. Brown said he didn't think a sale of Ally was a realistic possibility right now given the size of the lender. "My phone is open every single day and it's not ringing" with calls from potential buyers, he said.

The company will hold an investor day next Thursday where it gives an update on its business plans.

Looking ahead, Mr. Brown said Ally is on track to deliver 15% growth in earnings per share this year, translating to about $2.30 in adjusted per-share profit. Analysts have predicted $2.37, according to Thomson Reuters.

Ally redeemed $1.3 billion in remaining Series G preferred securities during the quarter, a move the CEO said removes the restriction on offering common equity distributions and positions Ally to meet its objective of initiating a dividend and share repurchase program in 2016.

Overall, Ally reported a profit of $263 million, up from $177 million a year earlier. On a per-share basis, Ally reported a loss of $1.97 a share because of the redemption of preferred securities. Excluding that redemption, among other items, Ally earned 52 cents a share, up from 40 cents a year earlier and a penny better than analysts' average estimate.

Write to Lisa Beilfuss at [e-mail] and Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

February 02, 2016 15:29 ET (20:29 GMT)

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